Investing.com – Bearish sentiment in the euro has returned following the European Parliament elections and a sharp rise in political risks, according to Bank of America Securities.
At 08:25 ET (1225 GMT), the price was down 0.3% at $1.0730, with the pair down more than a full percentage point over the past week.
The European Parliament elections, which ended over the weekend, saw a sharp move to the right in several countries, especially France.
That prompted French President Emmanuel Macron to call early legislative elections on Monday. The move represents a roll of the dice on his political future and could potentially hand major political power to Marine Le Pen’s far-right party.
Following this event, rating agency Moody’s (NYSE:) issued a credit warning.
“These early elections increase risks to fiscal consolidation,” Moody’s said in a statement late Monday, calling them “credit negative” for the country’s Aa2 rating.
EUR/USD appears to have broken above 1.09 and escaped the year-to-date downtrend just last week, analysts at BoA Securities said in a June 10 note.
However, political instability in the EU (along with large job losses in the US) has brought the EUR/USD rate back to 1.07 starting this week.
“Thanks to these catalysts, bearish sentiment is now spreading across several euro pairs. “Event analysis shows a bearish continuation signal for EUR/USD as the euro put-put skew increased sharply by 4% over the weekend,” the Bank of England said.
“Positioning analysis shows broad downtrend signals for the euro against sterling, yen and Swedish krona.”